INSERT COMPANY LOGO HERE - Frost & Sullivan€¦ · Aquasana has the broadest spectrum of superior...

2013

INSERT COMPANY LOGO HERE

2013 North American SSL Certificate

Product Leadership Award

2014

2014 North American Residential Water Treatment Systems

Product Line Strategy Leadership Award

BEST PRACTICES RESEARCH

© Frost & Sullivan 2 “We Accelerate Growth”

Contents

Background and Company Performance ........................................................................ 3

Industry Challenges .............................................................................................. 3

Aquasana's Product Line Strength and Customer Impact ........................................... 3

Conclusion........................................................................................................... 7

Understanding Product Line Strategy Leadership ............................................................ 7

Key Benchmarking Criteria .................................................................................... 8

Best Practice Award Analysis for Aquasana .................................................................... 9

Decision Support Scorecard ................................................................................... 9

Product Line Strength ......................................................................................... 10

Customer Impact ............................................................................................... 10

Decision Support Matrix ...................................................................................... 11

The Intersection between 360-Degree Research and Best Practices Awards ..................... 12

Research Methodology ........................................................................................ 12

About Frost & Sullivan .............................................................................................. 12



Background and Company Performance

Industry Challenges

The global residential market displays an excellent platform for widespread water-

treatment opportunities and increased potential for product growth and acceptance.

However, the conservative nature of residential customers limits market potential in

specific regions of the globe. Consumers' key criteria are Trust and product reliability

which will define the success of a product line. Companies should aim to position their

products to gain mindshare and the trust of customers based on a strong brand and aptly

backed by a portfolio of suitable products. Due to the highly fragmented and competitive

market environment, companies are bound to face the following key challenges that can

significantly impact their growth, thus requiring additional strategic planning to overcome

them in the most efficient manner.

� Conservative customers

� Middle-class' limited preference toward lifestyle products

� Numerous water-treatment purifier options

The conservative customer base is a challenge that can be difficult to address. However,

challenges related to product costs can be addressed by customizing water-treatment

product portfolios that cater to niche customer requirements such as counter top systems

for a family of 3 to 4, shower filters for treating only bathing water, and point of use

drinking water treatment solutions. The final challenge of a crowded marketplace places

the onus on the supplier to identify the niche for the product and position it appropriately.

It is at this juncture where marketing and appropriate distribution channels play a critical

role in the success of the product.

Aquasana's Product Line Strength and Customer Impact

Breadth

Frost & Sullivan firmly believes that the breadth of the product line for a target customer

base is an excellent indicator of a company’s dedication to develop a product portfolio that

caters to the diverse needs of its customer requirements. Additionally, a broad and robust

product portfolio also aids in addressing the industry challenge of limited preference

toward lifestyle products among the middle-class group, by catering to all classes of

customers with various water-treatment requirements.

Aquasana has the broadest spectrum of superior products in the water-treatment market

today, right from point-of-use water-filtration devices such as drinking-water filters that

go under the counter, on top of the counter, or are hooked up to the faucets, to the

recently released Powered Water Filtration system that provides professional-level water



filtration without installation. In addition to these, it also offers multiple shower-filtration

products and has the ability to customize its products based on the specific needs of the

consumer, basically by studying the customer’s water-use habits and identifying key

patterns and specific needs. The company also offers a full line of customizable point-of-

entry products (whole-house water filtration) and softeners that are designed for specific

target customer groups and thus offers a solution depending on the contaminants present

in the water. For example, if a customer resides in an area that uses chlorine as a primary

disinfectant, then his softener solution will be completely different from a person residing

in an area where chloramine is the primary disinfectant. Many people in the United States

consume well water, which has some unique characteristics compared to water from other

sources. In such cases, Aquasana offers a comprehensive water-testing report before

selecting the customized solution, which could be a combination of different media in the

filtration tank or equipped with additional tanks to suit the needs.

Technology Leverage

Technologically sound products undoubtedly have the upper hand for excelling in a highly

fragmented and competitive environment such as the one found in the residential water-

treatment market. Constant innovation to discover cutting-edge technologies that can

augment the efficiency of existing product lines proves to be highly advantageous for

suppliers to sustain the value addition for its customers.

Frost & Sullivan notes that Aquasana recently deployed an innovative technology through

its Powered Water Filtration system, which provides pure, fast, and good-tasting drinking

water through a high-powered selective filtration technology that is engineered for purity.

This system filters 10 times more contaminants in comparison to conventional pitchers

that reduce only 5% of contaminants. The selective claryum filtration within the system

helps to retain the naturally occurring minerals in the water such as calcium, potassium,

and magnesium, while removing other heavy metals such as lead and mercury, thus

providing customers with healthier and better-tasting water. While traditional pitchers use

gravity to slowly trickle water over filter granules, Aquasana's Claryum® technology uses

power to filter water much faster. This technology thus combines the functionalities of two

key water-filtration systems—under-the-counter and pitcher filters—to develop Aquasana's

Powered Water Filtration system that offers high-purity filtered water without the

additional hassle of installation. In addition to this newly introduced filtration technology,

Aquasana has further invested in some unique research projects with the University of

Texas, Austin, specifically to address the need to remove chloramines from tap water. The

use of chloramines as a water disinfectant has been growing. Chloramine is now being

utilized in more than 40% of the households to disinfect water. Most filters in the market

are certified to remove chlorine but not chloramines, and the entire process of chloramine

filtration is totally different in terms of media (carbon) usage. Thus, based on the results

from the extensive research, Aquasana has redesigned its entire product portfolio in 2013

to incorporate the latest technologies that can effectively aid in removing chloramines

from tap water. This has garnered extremely positive reviews from thousands of its



customers. Apart from this, the company worked with National Sanitation Foundation

(NSF) in 2013 to achieve a certification for the removal of pharmaceuticals, and as of the

end of August 2014, Aquasana’s drinking-water products were among the first in the

market to obtain this certification.

Additional Features

Companies that excel in offering a comprehensive suite of products to serve customers

with varied needs in terms of functionality, features, applications, and ease of use are the

ones that succeed in achieving a strong position in this highly competitive market

environment. In order to attain this position, companies must strive to continually update

their product lines with an aim to reflect the changing customer landscape as well as their

individual needs and behaviors. This in turn supports maintaining a reputation for

continuing relevance in the market.

Aquasana’s strategy to handle research and development (R&D) in order to constantly

upgrade the product features is through a leveraged R&D model. Its products are

designed in such a way that they can be easily replaced with various solutions available in

the marketplace. The company has worked with various manufacturers of carbon blocks

and other filtration media to bring about new media features, improvements, and

developments into the market. Frost & Sullivan's competitive analysis confirms that a

major advantages for Aquasana is that it can incorporate these developmental features

into its filtration products very conveniently. The company has thus been constantly

upgrading its product features and updating its suppliers to make sure that its customers

have the best available product in the market. Aquasana employs the dedicated practice

of modifying product features based on direct customer reports (complaints about water

quality, contaminants) that it receives on a day-to-day basis. This in turn urges the

company to excel and develop upgraded versions of its product lines that can address

these customer complaints in the most efficient manner. It has a robust customer

research team in place that analyzes customer feedback and complaints without filtering

them at any level. In turn, the company leverages these responses to drive innovation

into its product line. The customer research team also conducts primary research to

understand concepts and shifting trends that are key driving factors that also serve as a

trigger among consumers for a water filtration system.

Supply Chain Reliability

Companies need to secure their supply chain in such a way that they can assure both the

supply to the customers as well as after-sale replacement needs. This in turn calls for

unique approaches to ensure the availability of key components from supply-chain

partners at the right time to make sure that the products are available to customers on

time.

Aquasana manufactures the majority of its own products from its facility in Texas. The raw

materials (key components) are usually bought from a variety of suppliers based on the



latest technologies available in the market, which are then incorporated into the product

lines using state-of-the-art manufacturing and assembly techniques. Aquasana has

devised a strategy of multi-sourcing its key components, in which case if one supplier

experiences a delay in fulfilling its demand, Aquasana can move on to another supplier

very quickly. Frost & Sullivan's research finds that this negates any possibilities of a delay

in the product reaching its end user and thus helps to enhance the customer’s reliability

on the brand, further strengthening the brand equity and reliability of Aquasana.

Price/Performance Value

Companies should understand the balance of price versus performance value in highly

fragmented and price-sensitive markets, such as the residential water-treatment market,

where numerous low-cost options are available. These provide stiff competition with

performance that is similar to a brand-recognized product. Companies should thus

establish a key value proposition that will provide them with a competitive advantage over

other market participants and position themselves in the high-performance value

quadrant.

Aquasana aims to lead the industry in terms of three basic aspects: performance, value,

and convenience. From a performance standpoint, the company is certified to remove

more contaminants than any other water-treatment product available in the market. From

a value standpoint, the company measures itself based on the cost incurred by its

customers per gallon of treated water. In this aspect, Aquasana leads the industry by

providing less than 10 cents per gallon of filtered water. From a convenience standpoint, it

continually monitors the usability of its products through customer feedback and is thus

constantly striving to improve this aspect to create the most user-friendly and lifestyle-

oriented product in the industry and in turn enhance customer value in this process.

Brand Equity

Branding strategies affect revenue growth and profit margins of companies and help in

securing an advantageous brand position for them in the market. Hence, companies

employ dedicated marketing and support teams to both accomplish and sustain a

respectable brand position in the market. Additionally, a robust product portfolio backed

by strong innovation and best-practice accomplishments can further strengthen brand

position.

Due to a strong retail presence, many of the competing brands are much more well-known

in the market in comparison to Aquasana. On the other hand, Aquasana has a strategy

directed to consumers and is planning to drive its brand awareness through direct

marketing channels. Its products have a very strong online presence and its dedicated

marketing team uses the mobile platform to reach out to both current and prospective

customers with an updated catalogue providing the necessary product details. Later this

year, the company is planning to launch a direct-response advertising campaign wherein

Aquasana will use the television platform to promote its products. Apart from these



efforts, certain best practices adopted by Aquasana have enhanced its environmental

sustainability credentials. For instance, Aquasana follows the 3R principle of reduce-reuse-

recycle, from the manufacturing stage to the finished product stage. The company

believes that it has the responsibility to help people live a healthy lifestyle and in a

healthier environment. It designs all products by keeping the environment and the

customer’s preferences in mind and thus proudly identifies its water-filtration products as

“best-in-class”. Aquasana’s drinking-water systems are engineered to minimize waste with

the help of reusable outer filter canisters made with Bisphenol-A-free plastic. Frost &

Sullivan's research reveals that the company’s salt-free softeners leave no impact on the

environment, unlike traditional salt-based softeners. Its drinking water systems eliminate

the need for bottled water, thereby reducing the impact of plastic waste on the

environment. Furthermore, Aquasana’s reusable glass bottles provide an eco-friendly

alternative to single-use disposable plastic bottles. The Aquasana manufacturing facility is

100% powered by wind energy. In addition, no fossil fuel is burned, and the green energy

generated helps decrease the amount of air pollution and greenhouse gases that are going

into the environment.

Conclusion

Aquasana has demonstrated an exemplary performance with a strategically developed

product line that caters to the demands of niche customers in the North American

residential water-treatment market. It has been consistently working toward upgrading

and developing its product strategies to match the constantly changing and evolving

customer landscape and demands of the market, thus strengthening its brand image and

reaching out to its customer base in the most sustainable and profitable manner. Frost &

Sullivan's independent analysis of the Residential Water market clearly shows that

Aquasana’s ability to enhance customer value and drive product and technology

innovation can be attributed to its strong product line strategy. In light of the

aforementioned achievements and its strong overall performance, Aquasana has earned

Frost & Sullivan’s 2015 Product Line Strategy Award for Residential Water Treatment

Systems.

Understanding Product Line Strategy

Ultimately, growth in any organization depends upon customers purchasing from your

company, and then making the decision to return time and again. A full, comprehensive

product line that addresses numerous customer needs and preferences is therefore a

critical ingredient to any company’s long-term retention efforts. To achieve these dual

goals (customer value and product line strength), an organization must be best-in-class in

three key areas: understanding demand, nurturing the brand, and differentiating from the

competition. This three-fold approach to delivering Product Line Strategy Leadership is

explored further below.



As discussed above, driving demand, brand strength, and competitive differentiation all

play a critical role in delivering unique value to customers. This three-fold focus, however,

must ideally be complemented by an equally rigorous focus on building a superior and

comprehensive product line.

Key Benchmarking Criteria

For the Product Line Strategy Leadership Award, Frost & Sullivan evaluated two key

factors—Product Line Strength and Customer Impact—according to the criteria identified

below.

Product Line Strength

Criterion 1: Breadth

Criterion 2: Scalability

Criterion 3: Technology Leverage

Criterion 4: Features

Criterion 5: Supply Chain Reliability



Customer Impact

Criterion 1: Price/Performance Value

Criterion 2: Customer Purchase Experience

Criterion 3: Customer Ownership Experience

Criterion 4: Customer Service Experience

Criterion 5: Brand Equity

Best Practice Award Analysis for Aquasana

Decision Support Scorecard

To support its evaluation of best practices across multiple business performance

categories, Frost & Sullivan employs a customized Decision Support Scorecard. This tool

allows our research and consulting teams to objectively analyze performance, according to

the key benchmarking criteria listed in the previous section, and to assign ratings on that

basis. The tool follows a 10-point scale that allows for nuances in performance evaluation;

ratings guidelines are illustrated below.

RATINGS GUIDELINES

The Decision Support Scorecard is organized by Product Line Strength and Customer

Impact (i.e., the overarching categories for all 10 benchmarking criteria; the definitions

for each criteria are provided beneath the scorecard). The research team confirms the

veracity of this weighted scorecard through sensitivity analysis, which confirms that small

changes to the ratings for a specific criterion do not lead to a significant change in the

overall relative rankings of the companies.

The results of this analysis are shown below. To remain unbiased and to protect the

interests of all organizations reviewed, Frost & Sullivan chose to refer to the other key

players in as Competitor 2 and Competitor 3.



DECISION SUPPORT SCORECARD: PRODUCT LINE STRATEGY LEADERSHIP AWARD

Measurement of 1–10 (1 = poor; 10 = excellent)

Product Line Strategy

Product Line

Strength

Customer

Impact Average Rating

Aquasana 10 9 9.5

Competitor 2 8 7 7.5

Competitor 3 6 6 6


Criterion 1: Breadth

Requirement: Product line addresses the full range of customer needs and applications

Criterion 2: Scalability

Requirement: Product line offers products at a variety of price points and functionality

levels

Criterion 3: Technology Leverage

Requirement: Demonstrated commitment to incorporating leading edge technologies into

product offerings, for greater product performance and value

Criterion 4: Features

Requirement: Products offer a comprehensive suite of features to serve customers at

multiple levels of functionality, ease of use and applications

Criterion 5: Supply Chain Reliability

Requirement: There is sufficient control over the supply chain to ensure availability of key

components and thereby the availability of products in the product line

Customer Impact

Criterion 1: Price/Performance Value

Requirement: Products or services offer the best value for the price, compared to similar

offerings in the market

Criterion 2: Customer Purchase Experience

Requirement: Customers feel like they are buying the most optimal solution that

addresses both their unique needs and their unique constraints

Criterion 3: Customer Ownership Experience

Requirement: Customers are proud to own the company’s product or service, and have a

positive experience throughout the life of the product or service

Criterion 4: Customer Service Experience

Requirement: Customer service is accessible, fast, stress-free, and of high quality



Criterion 5: Brand Equity

Requirement: Customers have a positive view of the brand and exhibit high brand loyalty

Decision Support Matrix

Once all companies have been evaluated according to the Decision Support Scorecard,

analysts can then position the candidates on the matrix shown below, enabling them to

visualize which companies are truly breakthrough and which ones are not yet operating at

best-in-class levels.

DECISION SUPPORT MATRIX: PRODUCT LINE STRATEGY LEADERSHIP AWARD

High

Low

Low High

Customer Impact


Aquasana

Competitor 2

Competitor 3



The Intersection between 360-Degree Research and Best

Practices Awards

Research Methodology

Frost & Sullivan’s 360-degree research

methodology represents the analytical

rigor of our research process. It offers a

360-degree-view of industry challenges,

trends, and issues by integrating all 7 of

Frost & Sullivan's research methodologies.

Too often, companies make important

growth decisions based on a narrow

understanding of their environment,

leading to errors of both omission and

commission. Successful growth strategies

are founded on a thorough understanding

of market, technical, economic, financial,

customer, best practices, and demographic

analyses. The integration of these research

disciplines into the 360-degree research

methodology provides an evaluation

platform for benchmarking industry players and for identifying those performing at best-

in-class levels.

About Frost & Sullivan

Frost & Sullivan, the Growth Partnership Company, enables clients to accelerate growth

and achieve best in class positions in growth, innovation and leadership. The company's

Growth Partnership Service provides the CEO and the CEO's Growth Team with disciplined

research and best practice models to drive the generation, evaluation and implementation

of powerful growth strategies. Frost & Sullivan leverages more than 50 years of

experience in partnering with Global 1000 companies, emerging businesses and the

investment community from 40 offices on six continents. To join our Growth Partnership,

please visit http://www.frost.com.

360-DEGREE RESEARCH: SEEING ORDER IN

THE CHAOS

Technology

Obsolescence

Disruptive

Technologies

New

Applications

CEO

Demographics

Needs

and

PerceptionsSegmentation

Buying

Behavior

Branding

and

Positioning

Competitive

Benchmarking

Emerging

Competition

Competitive

Strategy

Capital

Investments

Availability

of

Capital

Country

Risk

Economic

Trends

Crowd

Sourcing

Growth

Strategies

Career

Development

Growth

Implementation

Industry

Evolution

New Vertical

Markets

Industry

Expansion

Industry

Convergence

Emerging

Technologies

Smart Cities

Sustainability

New Business

Cultures

GeoPolitical

Stability

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